The benefits of interchange pricing versus tired pricing in merchant credit card processing and acceptance.

Merchants tend to fall victim to not knowing what rates merchant processing companies are charging and tend to be uneducated in the process of learning about good deals versus bad deals when it comes to credit card processing.  The purpose of this article is going outline and discuss the benefits of interchange pricing models versus tired pricing models when speaking in terms of merchant credit card processing and acceptance.  The two pricing categories both have advantages and disadvantages depending on how many basis points you are paying, and how you are taking your credit cards in your online business or retail brick and mortar location. Merchant credit card processing and acceptance.


Merchant credit card processing and acceptance.

Interchange pricing is defined as “Merchant accounts that operate on an interchange plus pricing structure may sound more intimidating, but they’re much more transparent and less expensive than tiered accounts. On an interchange plus pricing structure, the merchant pays the exact interchange fee in addition to a flat markup to their merchant service provider. This eliminates inconsistent buckets and overpaying for inflated rates.”  As a result in interchange pricing, you pay less than you typically would in a tiered model because you are not exposed to inconsistent fees and understand that you only pay above the cost of the credit card transaction ran by Visa and Mastercard (TM). The interchange fees are always set by Visa and Mastercard (TM), thus paying “above interchange pricing” is cut and dry, versus having to understand bucket rates, and why and how they fall where they do.  For example, if you are a merchant that owns a bakery and are processing credit cards to sell a cookie, you would run the sale on your point of sale credit card terminal. After running a sale on the credit card terminal, anticipating you swiped the card, you’ll pay  a fee above the charge of the card. What is the charge of the card? You can refer to the interchange tables (updated twice a year in April and October). Since we’re in April now, interchange fees will be rising, and its important to know them.  Where do you find them? Simply look here: Visa and Mastercard  to get all the interchange fees for credit card processing. Merchant credit card processing and acceptance.

Tiered rates are those in which are buckets together, and less beneficial for the merchant processing credit cards.  The reason that tiered rates are unfavorable versus though of interchange is because they are grouped together and are dependent not only on card type, but how you run a sale, and other conditions such as batching  out transactions the bank timely, etc.  These circumstances are the fundamental problem with tiered rates, not to mention you get a higher interchange charge assessed.  So, you may be wondering what does it mean per card type? Well on tired rates, you are dealing with 3-6 rates, typically 3, which go from 1.69% on a retail account up to 5% in some cases.  What is the factor causing the higher rates to be charged? Its if the card is swiped or keyed in as well as if the card is a debit card, credit card, rewards card, etc.  These circumstances cause the card type typically to bump to the higher rate, and thus, you the merchant pays more to process the card.  If you are on  a straight interchange method, you will not be penalized for the downgrades.

Merchant credit card processing and acceptance

In conclusion, you can see there are two ways to be set up as a merchant who accepts credit card processing. These ways are important to understand, so you can understand how you are priced, and what your rates are.  If you have any concerns and questions regarding how to set up credit card processing and what the best way is, Centurion Payment Services will be happy to help. Merchant credit card processing and acceptance.